$A closes lower after Battellino speech

The Australian dollar closed lower on Wednesday after comments from the central bank deputy governor convinced market observers that the current cycle of interest rate rises may be near its peak.

At 5pm, the Australian dollar was trading at $US0.8983/91, down from Tuesday’s close of $US0.9124/27.

The local unit traded during the local session between $US0.9068 and $US0.8968.

The unit slipped more than half a US cent after RBA deputy governor Ric Battellino said in a speech the central bank's interest rate settings are now back to a "normal range", following recent rises in commercial bank deposit, housing and business lending rates.

He also said if interest rates in the broader economy are rising relative to the central bank's official cash rate "there is less need for the cash rate to rise".

4Cast Financial Markets economist Michael Turner said debt futures contract prices were reflecting about a 15 per cent chance of a rate rise at the RBA's next board meeting in February, down from about 60 per cent.

"It looks like a February rate rise is not going to happen," he said.

The RBA lifted the cash rate by 25 basis points to 3.75 per cent on December 1 following similar moves in October and November.

Over the past year, currency traders have relied on Australia’s relatively high interest rates to attract investors to local assets. Expectations that there might be a pause in the RBA’s rate hike cycle saps strength from the local currency.

At 5pm, the Australian dollar was trading at ¥80.46, down from Tuesday's close of ¥81.10 and at €0.6183, down from €6234.

The euro finished at $US1.4534, down from Tuesday's close of $US1.4638, and ¥130.12, up from ¥130.07.

The US dollar ended the local session at ¥89.53, up from ¥88.85 previously.

Also on Wednesday, the Australian Bureau of Statistics released data that showed economic growth slowed in the September quarter.

Real gross domestic product grew by a less than expected, seasonally adjusted 0.2 per cent in the September quarter and 0.5 per cent over the 12 months to September, the ABS said.

The national economy grew at an unrevised 0.6 per cent in the June quarter.

Financial markets had forecast a 0.4 per cent rise in the September quarter.

Mr Turner said the GDP data, which was released half an hour before Mr Battellino’s speech, sent the local unit 0.15 of a US cent lower.

During the offshore session, the US Federal Reserve is expected to make its monthly interest rate decision.

The US Federal Funds rate is in a target range of between zero to 0.25 per cent.

Market forecasters expect the US Fed to keep the rate steady at its historic low.

Mr Turner said investors would look for hawkish language in the Fed’s accompanying statement about the future direction of interest rates.

He predicted the Australian unit could trade in a wide range between $US0.8900 and $US0.9070.